File-sharing website Megaupload shut down, NZ-based founder arrested

UPDATED: One of the world's biggest file-sharing websites, Megaupload, has been shut down today. Its German-born but New Zealand-based founder, Kim Dotcom, was arrested along with three others in Auckland.

The four Auckland-based men arrested in relation to the Megaupload case have appeared in the North Shore District Court this afternoon.

The Judge understood the defendants were opposed to photography and filming. However Megaupload founder Kim Dotcom interjected to say he and the other defendants had no problems with filming, photography, or other coverage of the case.

“We have nothing to hide,” he said.

Bail applications will be dealt with on Monday morning, the Judge said. The accused have been remanded in custody until then. Lawyers acting for the US government were opposed to bail for all of the four defendants.

Update 14:05

At the police press briefing this afternoon, detective inspector Grant Wormald gave us only a small amount of information that we didn't already know.

DI Wormald said he had been personally involved since August last year, after being contacted by the FBI and asked for assistance. He acknowledged that the work done by the FBI and his own team on the complex investigation was excellent.

He was unable to give details of financial institutions being investigated for assets relating to the investigation.

What is apparent is the New Zealand Police have done what they can to stay out of the way of the FBI's leading role.

DI Wormald made it clear that the New Zealand portion of the investigation was part of an ongoing investigation spanning the globe.

When asked whether those arrested had breached New Zealand copyright laws, he said: "I think it's more than likely that they have. Can't say that with surety."

He also said that those arrested were unlikely to be charged under New Zealand laws. "We're investigating the scene," he said, "but there's no intention to [charge them under New Zealand laws]."

PC World asked what would happen with any computer equipment seized at the premises being searched and DI Wormald said it would be inventoried to Crown Law, which would liaise with the US Department of Justice to decide what would happen to any computer equipment.

Update 11:26am: Anon takes down US government and copyright holders' websites

Activist hacker group Anonymous has reportedly taken down the websites of the US Department of Justice, Universal Music, the RIAA, and the MPAA in retaliation for the Megaupload shutdown and arrests.

The press release said that the arrests were carried out by the Organised & Financial Crime Agency New Zealand (OFCANZ) and New Zealand Police, following "a mutual legal assistance request" from the United States.

The release said the people arrested were at addresses in Coatesville and Orakei.

"A total of 10 search warrants were executed at residential and business addresses across Auckland," the police said.

"The FBI contacted New Zealand Police in early 2011 with a request to assist with their investigation into the Mega Conspiracy," said detective inspector Grant Wormald.

"We were happy to provide this assistance. Staff from OFCANZ and New Zealand Police have worked with the US authorities over recent months to effect today’s successful operation."

"All the accused have been indicted in the United States. We will continue to work with the US authorities to assist with the extradition proceedings," Wormald said.

The police said assets that have been seized include luxury cars with a total value of NZ$6 million. Over NZ$10 million has also been seized from local financial institutions.

As we understand it, the grounds for the indictment are charges of racketeering, money laundering and copyright infringement, dependant on several factors.

The claimants say that Megaupload’s limit of 72 minutes of video for non-premium users pushes people towards premium subscriptions in order to watch infringing copies of major-release films (which are generally longer than 72 minutes). Premium subscribers are presented with ads, which form a revenue stream for Megaupload, as do the premium subscriptions. These form the basis for the money laundering portion of the claim.

The claimants also say that the abuse reporting tool for Megaupload does not work, since it removes the URLS and ability to search for infringing material, but does not remove the infringing copy itself.

A search warrant in 2010 found 34 infringing copies of movies on a Megaupload server.

Update 10:15am: FBI releases names of thsoe arrested in NZ

The FBI has issued a press release which claims that Megaupload had generated more than US$175 million in "criminal proceeds".

"This action is among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime," the statement said.

The FBI also released a list of the individuals charged, which includes another New Zealand resident, Bram van der Kolk (29).

van der Kolk, along with two others on the list, Finn Batato (38) and Mathias Ortmann (40), was also arrested in Auckland overnight.

The charges levelled at Dotcom and others are: engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering, and two substantive counts of criminal copyright infringement.

The FBI said law enforcement had executed more than 20 search warrants in the US, New Zealand and seven other countries, and seized more than US$50 million in assets.

Update 10am: Police still stationed at Mega mansion

IT lawyer Rick Shera said on Twitter that when he passed Dotcom's mansion this morning, New Zealand police were stationed at all entrances.

Original story:

One of the world's biggest file-sharing websites, Megaupload, has been shut down today. Its German-born but New Zealand-based founder, Kim Dotcom (37), was arrested along with three others in Auckland.

Megaupload, Megavideo, MegaLive and MegaPorn are all offline this morning, New Zealand time.

The indictment levelled against Dotcom alleges he and his company have cost the entertainment industry more than US$500 million, according to The New York Times.

It also says that Megaupload was once the 13th most popular website in the world.

Shortly before the shutdown Megaupload released a statement to say that "the vast majority of Mega's internet traffic is legitimate, and we are here to stay".

The statement also said the company was happy to work with "the content industry" on a solution.

Dotcom, who had his name legally changed from Schmitz, has recently courted controversy when Megaupload hired a bevy of celebrities to make a music video about the website. The video featured Will.i.am, Kim Kardashian, and Alicia Keys.

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